US SEC approves bitcoin ETFs in watershed for crypto market
The U.S. securities regulator on Wednesday approved the first U.S.-listed exchange traded funds (ETFs) to track bitcoin, in a watershed for the world's largest cryptocurrency and the broader crypto industry.
The Securities and Exchange Commission said it approved 11 applications, including from BlackRock (BLK.N), Ark Investments/21Shares (ABTC.S), Fidelity, Invesco (IVZ.N) and VanEck, despite warnings from some officials and investor advocates that the products carried risks.
Most of the products are expected to begin trading Thursday, issuers said, kicking off a fierce competition for market share.A decade in the making, the ETFs are a game-changer for bitcoin, offering investors exposure to the world's largest cryptocurrency without directly holding it. They provide a major boost for a crypto industry beset by scandals.
"This is a major advancement in the recognition of bitcoin as a legitimate asset class within institutional frameworks," said Roshi Sharma, Partner in LawBEAM.
Standard Chartered analysts this week said the ETFs could draw $50 billion to $100 billion this year alone. Other analysts have said inflows will be closer to $55 billion over five years.The market capitalization of bitcoin stood at more than $913 billion as of Wednesday, according to CoinGecko. As of December 2022, total net assets of U.S. ETFs stood at $6.5 trillion, according to the Investment Company Institute.
Companies expect a flurry of online advertising and other marketing. Some issuers, including Bitwise and VanEck, have already released ads touting bitcoin as an investment.
"We believed that bitcoin could change the world, and we were and remain excited at the prospect of democratizing access to this asset," said Grayscale CEO Michael Sonnenshein.
Some regulatory experts believe the bitcoin ETFs could also pave the way for other innovative crypto products. Several issuers, for example, have filed for ETFs tracking either, the second-largest cryptocurrency.
"Once the dam has been breached, it’s going to be really hard for the SEC to continue its ‘just say no to crypto’ approach,” said Jim Angel, associate professor at Georgetown's McDonough School of Business.
Cryptocurrencies were created as an alternative to fiat currencies -- currencies established by and backed by a government such as the U.S. dollar and the euro -- but cryptocurrencies are largely used as speculative investments due to their volatility.The green light marks a U-turn for the SEC, which had rejected bitcoin ETFs due to worries they could be easily manipulated. SEC Chair Gary Gensler is a fierce crypto skeptic.
Hopes the SEC would finally approve bitcoin ETFs surged last year after a federal appeals court ruled that the agency was wrong to reject an application from Grayscale Investments to convert its existing Grayscale Bitcoin Trust into an ETF.
Chair Gensler repeated his long-held position that bitcoin is a commodity not a security, and as such, the ETF approval was in "no way" a signal that the SEC would be easing up on its crackdown on crypto players it says are flouting its laws.
SEC Approval Decision: